In April 2018, the Reserve Bank of India(RBI) had placed a ban on cryptocurrency trading that restricted banks and other financial institutions from enabling cryptocurrency-related services. In March of this year, the Indian Supreme Court lifted Reserve Bank’s two-year ban on cryptocurrency trading in India for what many said was a historic verdict.
After the Supreme Court verdict, many statistics showed that a growing number of Indians were interested in cryptocurrency trading, and many exchanges saw an increase in trading volume.
Cryptocurrency exchanges have now approached the Reserve Bank of India (RBI) as stated by The Economic Times, and sought clarification on their status and domestic tax within the country. Crypto exchanges wrote to the Reserve Bank of India (RBI) seeking clarification as financial institutions refused to provide the financial services they wanted because of a lack of clarity on the part of the regulators, The Exchanges have requested clarity on the platform’s categorization as commodity, currency, goods, or service that defines whether they are paid under the Good and Services Tax (GST).
Praveenkumar Vijayakumar, Chairman & CEO of Belfrics Global, was reported as saying:
“If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive,”
In the background, it is claimed that the indirect tax department which collects GST has initiated preliminary discussions on how cryptocurrencies could be brought within the scope of the GST. A few years earlier, the sales tax department and VAT authorities had also launched an investigation into Bitcoins‘ taxability. The indirect tax department also launched an investigation into Bitcoin exchanges operating in India to assess the rate of GST that could be imposed on them.
“After the supreme court judgment, the RBI was supposed to issue a new circular directing the banks to start banking relationships again with cryptocurrency exchanges and businesses. When the Crypto exchanges approached banks to start operations the banks simply denied as they had not received any notification from the RBI till date,” said Sidharth Sogani, CEO, CREBACO Global. “Banks cannot deny the service after the Supreme Court judgment, they are just playing safe as banks will always be anti-Bitcoin, but because of this huge potential is getting sacrificed.”
